Broker Check

Help Make Your Retirement Assets More Valuable

Retirement Read Time: 4 min

Discover A Way to Help Make Your Retirement Assets More Valuable

Due to careful retirement planning, some individuals find that they have more in retirement assets than they actually need to live on. Many of those individuals express a desire to leave their Individual Retirement Account (IRA) or qualified plan assets to a loved one. However, this can be difficult because IRAs and qualified plans are subject to estate taxes at death and income taxes on any withdrawals, which reduces the amounts left for heirs. Fortunately, there’s a way for those who have too much pre-tax money in these types of plans to work to make the most of those funds for their loved ones. How? By using the required minimum distributions (RMDs) they must withdraw from those account(s) every year1 to fund the premiums on a permanent life insurance policy that names their loved one(s) as beneficiaries. Ultimately, the death benefit provided by the life insurance has the potential to provide far more assets than the IRA proceeds alone would have (if the life insurance had not been purchased).

The IRA Maximization strategy

If you’ve got retirement assets you don’t need for your current expenses and would like to pass on to your children and/or grandchildren, you may wish to consider using the IRA Maximization strategy. With this strategy, permanent life insurance can serve as a tax-advantaged protection vehicle that may help you make the most of the money you withdraw from those retirement accounts for your heirs.

How the IRA Maximization strategy works

When you implement the IRA Maximization strategy, you use the net proceeds of the money you are required to withdraw from your IRA or qualified plan account(s) each year to purchase a permanent life insurance policy (ordinarily owned by a trust) that names your loved ones as beneficiaries. When you pass away, the remaining balance of your IRA (after any Income in Respect of a Decedent (IRD)/estate taxes) is distributed to your beneficiaries. The life insurance/trust proceeds also go to your beneficiaries.

The advantages are many

Implementing the IRA Maximization strategy offers advantages for both you and your loved ones:

  • Additional financial confidence for your loved ones: The amount that your heirs ultimately receive can be greater than they would have received if you had not purchased life insurance.
  • The ability to convert a taxable asset to an income tax-free one: Through withdrawals to help fund the premiums, you will slowly convert an asset subject to taxes (your IRA or qualified plan account) to one received income tax free — life insurance.
  • The potential to save money on taxes: If the life insurance is designed properly, estate and generation skipping taxes may be avoided.
  • Potential cost savings: The death benefit payable to the trust when you pass away will be excluded from your gross estate.
  • Access to cash: Permanent life insurance policies build cash value,2 which the policy owner can access in emergencies. If your policy is not owned by a trust, you may use income tax-favored loans and withdrawals to access the cash value.3

Special considerations before implementing the IRA Maximization strategy

  • Before committing to this strategy, be sure that you:
    • have enough retirement income from sources other than your IRA RMDs; and
    • want to use the money in your unneeded IRA or qualified plan account(s) for the benefit of your loved ones — and not some other purpose; and
    • would like to use your RMDs to help pay the life insurance premiums — and that you can afford the premiums if the RMD is insufficient to pay the entire premium.
  • If you have non-spouse beneficiaries: Under the SECURE Act of 2019, most non-spouse beneficiaries of inherited IRAs have to take their RMDs within 10 years of the owner's death, rather than “stretching” them over their lifetime (as a spouse can). That may have serious tax consequences for the beneficiaries you’ve designated to receive your retirement assets. On the other hand, if you implement the IRA Maximization strategy, your beneficiaries would receive the proceeds from your life insurance policy income tax free.

In conclusion

This article only briefly summarizes the IRA Maximization strategy. Those considering implementing a solution such as this should work with their financial, tax, and legal professionals to understand the role it could play in their overall estate plan — and whether it might be a good fit for their individual situation.


1 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

2 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial professional and refer to your individual whole life policy illustration for more information. Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.

3 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under age 59½, any taxable withdrawal may also be subject to a 10% tax penalty.

2023-165184 Exp. (11/25) *pre-approved content*

Have a Question?

Sam Duffey
Sam Duffey
Ashford Brokerage, CA License #0J09024, AR License #15480533 Director of Brokerage Sales (205) 843-9434

Introducing Income Protection Made Simple

In every stage of life, the sudden halt of income or cash flow can have a profound impact on our lifestyle and hinder progress towards future financial goals. As a seasoned professional in the insurance industry, I understand the importance of safeguarding what many believe is ones most important financial resource, and that's where I come in.

I collaborate closely with financial professionals, serving as a valuable partner to enhance their existing carrier relationships and offer comprehensive protection against unforeseen circumstances like untimely death, injury, or illness.

Through my unique KNOW - SHOW - FLOW service, financial professionals experience a seamless process that empowers them to:

KNOW: Stay informed about the most prevalent and relevant cases we encounter, enabling them to make well-informed decisions for their clients.

SHOW: Master the art of strategizing and implementing protection plans with ease, even providing the option for joint meetings if necessary, to foster client understanding and confidence.

FLOW: Leverage our innovative agency marketing website and cutting-edge tools that enable them to scale their business to new heights.

Our offerings encompass a range of insurance products tailored to individual needs:

1) Disability Income: Provides crucial protection for earning professionals against the unexpected impacts of injury or illness on their income.

2) Term Life: Ensures the continuity of future income for loved ones in the event of the untimely passing of a breadwinner.

3) Whole Life: Establishes a lasting legacy benefit and serves as a reliable retirement distribution strategy.

When working with our brokerage team, success takes on a clear and tangible form. We strive to empower financial professionals to engage with clients confidently about income protection, streamlining the new business process, and unveiling new markets as well as sales ideas that lead to substantial business growth.

Our ultimate objective is to equip you with the tools and knowledge necessary to protect your clients' financial well-being comprehensively. As a result, you'll find new ease in processing business, discover expanded market opportunities, and experience unmatched satisfaction as you witness your business scale to unprecedented heights.

Join us in making Income Protection Made Simple a reality for your clients and your professional success. Let's work together to secure their dreams and create a more secure financial future for all.